M&S profits plunge as transformation costs hit

Marks & Spencer has seen full-year profits collapse as the high street giant counts the cost of a brutal store closure plan.

Marks and Spencer Group Plc saw its profit before tax and adjusting items fall 5.4 percent to 580.9 million pounds for the 52 weeks to March 31, 2018 down from 613.8 million pounds in 2017 as its transformation plan is well underway.

"Closing stores isn't easy but it is vital for the future of M&S", said retail director Sacha Berendji.

"If anything the need for change has become more urgent. These changes come with short term costs which are reflected in today's results", said Steve Rowe, Marks & Spencer CEO in a statement.

As of the end of March, the retailer had 1,035 United Kingdom stores, made up of 300 clothing, home and food stores, 696 food-only stores and 39 outlets.

Revenue nudged up 0.7% to £10.7 billion.

Prior to Wednesday's update M&S shares, had fallen 26 percent over the previous 12 months, putting the stock in danger of being booted out of the prestigious FTSE 100 index.

"In the a year ago traditional retailers like Marks have faced a flawless storm of rising costs, a constrained consumer, and the relentless growth of online competition", said Hargreaves Lansdown analyst Laith Khalaf. "Alongside relocations, conversions, downsizes and the introduction of concessions, these closures will radically reshape M&S's clothing and home space".

Of the 100 stores, 21 have already been shut and M&S has now revealed the location of 14 further sites to close.

The move, which has been touted as part of a "radical transformation" plan by the retailer after years of falling sales, represents a "dramatic retreat from the United Kingdom high street that will trigger thousands of job losses" says The Guardian. This includes GBP321.1 million related to the United Kingdom store estate, up from GBP51.6 million the year before - as it accelerated its "transformation plans" - with a GBP15.5 million cost related to its IT restructure.

"There are a number of structural issues to address and we are taking steps towards fixing these", Mr Rowe added.

"And we're concentrating on tackling the culture of the business, making M&S a faster, lower cost and more commercial digital business".

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